Are tenants being robbed of their rental deposits?

November 1st, 2020

One of the biggest problems that a tenant is faced with when looking for property to rent, is paying the security deposit. Whether it is for residential or commercial purposes, landlords usually require a security deposit to be provided. This is done to aid or protect the landlord against any damage the tenant might cause or any other unforeseeable occurrence for example, a natural disaster or any other damage that was not by the doing of the tenant, such as burglary, etcetera. It is up to the landlord to decide the amount of the deposit required and it may encompass costs, which are not refundable, such as, the administration fee and the contract fee.

According to the Rental Housing Act 50 of 1999 (the Act) it was not previously required for a lease between tenant and landlord to be in writing. This was until the Rental Housing Amendment Bill B56 of 2013 came into effect, which now requires lease agreements to be in writing in order to avoid future disputes of its existence or its terms. Among other provisions, which the lease should provide for, is the provision for the payment of a deposit by the tenant to the landlord before occupying and enjoying possession of the property leased.

Deposit’s interest-bearing account

The Act provides that the landlord may require a tenant, before moving into the dwelling, to pay a deposit, which at the time, may not exceed an amount equivalent to the rental amount specified in the agreement by the parties. A deposit, although not mandatory in concluding a lease agreement, is commonly required by landlords in order to protect themselves by acting as security for possible claims. Section 5(3) of the Act requires that the deposit must be invested by the landlord into an interest-bearing account, which investment is for the benefit of the tenant.

Most tenants are not aware of this provision or requirement by the Act and landlords use this lack of knowledge to their advantage by not refunding tenants the interest earned on the deposit paid. The tenant has a right, during the period of the lease, to request the landlord provide them with written proof in respect of the interest accrued on such deposit, and the landlord must provide such proof on request, provided that where the landlord is or has a registered estate agent as provided for in the Estate Agency Affairs Act 112 of 1976, the deposit and any interest shall be dealt with in accordance with the provisions of that Act.

The reason tenants are not aware of the provisions to invest their deposit in interest bearing accounts for their benefit is because landlords either do not include this provision in the lease agreement or tenants do not thoroughly read the agreement and note same. This, as a result, causes them to not be aware of it.

Refund and inspection

On the expiry or termination of a lease, the tenant is entitled to a refund of the deposit paid to the landlord at the conclusion of the lease. This deposit, together with the abovementioned interest, must be refunded to the tenant, within seven days of expiration of the lease agreement. If no amounts are owed to the landlord in terms of unpaid rent, lost keys or the repairing of damage to property by the tenant, the landlord must refund the deposit and interest accrued to the tenant. The landlord and the tenant must inspect the premises on the termination of the lease to ensure that the premises are in the same condition it was at the time of the commencement of the lease. Should there be any damages to the property or any amounts owed by the tenant, the landlord can use the deposit plus the interest towards the payment of all amounts for which the tenant is liable for under the lease for reasonable costs of repair.

The balance of the deposit and interest accrued must, within 14 days of restoration of the property, be refunded to the tenant where the tenant is liable, in terms of unpaid rent, lost keys or the repairing of damage to property by tenant. By the end of the day, the interest earned on the deposit must be taken into account and included in the refund that the tenant is entitled to. This is not the case in most instances as tenants are not aware that –

  • their deposit bears interest;
  • they can request written confirmation of an interest-bearing account for their deposit; and
  • they must be given written confirmation of the cost of the damages to the property that the landlord is claiming.

Landlords owe tenants these duties by virtue of the Act and tenants should be so advised. This is unfortunate as landlords not only keep the accrued interest, but fail to inform tenants of this, nor do they include provision for this in the lease agreements.

Juniours Moremi LLB (UL) Company Law I and II (Wits) is a candidate legal practitioner in Pretoria.

This article was first published in De Rebus in 2020 (Nov) DR 8. 

De Rebus